7/23/2017 Total market view: "A lot has changed from my confidently bullish assessment of last week. First, all USA main indexes have reached medium term resistance (ie, Q3 or July pivot resistance levels). Safe havens have strengthened. Sentiment readings are considerably more bullish. Thus, some reaction lower for stocks is a much greater possibility."
Aside from DIA, other USA main indexes tried to go higher and then dropped, ending about even for the week.
4 of 5 USA mains are struggling at Q3 resistance levels (Q3R1s). Only DIA has cleared. This is also occurring with:
* Sentiment extremes recently reached, as 10 day put-call average is very near lowest levels of 2017; ISEE has had several very high spike readings in recent weeks, and even cautious AAII recently showed the 2nd highest bull-bear spread of 2017.
* RSI at or near overbought conditions on weekly / daily charts, several showing divergence.
* USA main indexes at or near the top of weekly Bollinger bands.
* Risk measures VIX and XIV still with the trend, but at notable extremes.
* Other safe havens strengthening somewhat.
So although larger trends intact, I thought higher odds of reaction lower in stocks. So far the market has been resilient and first drop on 7/27 was bought. I think the market is inviting sellers so we'll see if they show up.
Bottom line - Portfolio reduced exposure last week, opting to raise cash instead of adding IWM shorts or UVXY hedges. VIX reversal bar from historic lows, and XIV seeming to have rejection at YR3 was part of this decision. But trends are intact so willing to buy back again if no rejection at Q3R1s.
I will continue to mention good setups when time permits, but this week likely last dedicated post and daily tracking of each entry and exit will cease.
USA main indexes - 4 of 5 USA mains struggling at Q3R1s. Rejection hasn't happened yet, but my judgment call is that is the more likely next move. Also, new August pivots in play from 8/1.
Safe havens - VIX still below all pivots, so I can't be too bearish. On the other hand, potential rejection of XIV YR3 could very well be *the turn* in VIX/XIV for the year.
Sectors of note - USO somehow rallied above 2HP, but XLE a lot more work to reclaim long term pivots.
Global indexes - Benchmark ACWI also stalling at Q3R1. Other leaders FXI, EEM and INDA have pushed to higher levels, but watching 2HR1 / Q3R2 for FXI, YR2 / 2HR1 / Q3R2 for EEM and same levels for INDA. PS, Hang Seng and Nifty both approaching YR2s too, could be worth watching as well.
Currency and commodity - Oil perking up with CL1 contract making definitive hold of YP, and USO June low bang on YS1 with several nice divergences on higher timeframes. The real story of global index outperformance and GLD strength is of course the plunging $USD. The Pivotal Perspective said $DXY looking "screaming bearish" on 5/17/2017 and I even thought that was 1-2 days late. Since then -4.25% in 6 weeks. $DXY near multi-year lows but accelerating lower into these levels. Pivot support has mostly not bounced at all, or had brief bounce for 5 days in June that quickly resumed lower. Main point: 2HS1 next long term target at 92.79 but given the above and higher timeframes probably lower.
Katie Stockton in this Bloomberg video pointed to an SPX symmetry target of 2640, but I'm not sure why she missed the larger pattern that topped at 2468 (exceeded slightly but still close enough to watch.
That said, we agree - larger trends are up. It would take all USA main indexes to have a weekly close below 2HPs to even somewhat threaten the long term picture. These are SPX 2374, NDX 5476, INDU 20855, RUT 1394 (most likely to break first), and NYA 11564.
Otherwise, weekly and daily RSIs and Bollinger bands worth studying on the USA main indexes here, with several indexes showing divergence on daily or weekly charts or both.
VALUATION AND FUNDAMENTALS
Someone keeps selling 18x forward earnings.
Not quite as stretched as the prior post from last week, but daily put-call still at lowest levels of the year.
Proprietary work in progress model that I am still maintaining in bare bones form due to calls like this.
July dates (published 7/2/2017 Total market view)
Last week added 7/26
7/3 DIA high
7/21 gave 7/20 high (-1)
7/26 gave 7/27 low (+1)
August dates - a busy month for timing, alas, probably too busy to be much use.
8/2, bias stock high
I know, +/- 1 is not helpful at all with this many dates. I don't control the model and it just so happens to be busier this month compared to others. With August 2015 recently in memory, a lot of people seem to expect a fast sharp drop. I can tell you that very few were expecting that at the time. Maybe markets will melt up instead, or these dates will be minor swings in a range bound period.